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Good to Great. Why Some Companies Make the Leap... and Others Don´t. GOOD IS THE ENEMY OF GREAT. ”That´s what makes death so hard – unsatisfied curiosity.” Beryl Markham. GOOD IS THE ENEMY OF GREAT. * Can a good company become a great company, and if so, how?

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Good to Great

Why Some Companies Make the Leap...

and Others Don´t


GOOD IS THE ENEMY OF GREAT

”That´s what makes death so hard –

unsatisfied curiosity.”

Beryl Markham


GOOD IS THE ENEMY OF GREAT

* Can a good company become a great company, and if so, how?

... almost any organization can substantially improve its stature and performance, perhaps even become great, if it conscientiously applies the framework of ideas that have been uncovered in this study.


GREAT RESULTS

What´s inside

the

BLACK BOX?

GOOD RESULTS

GOOD TO GREAT


Good to

Great

Concepts

Sustained

Great

Results

Built to

Last

Concepts

Enduring

Great

Company

The Dynamics of Greatness


DISCIPLINED PEOPLE

Level 5

Leadership

First Who

then What

DISCIPLINED THOUGHT

Confront the

Brutal Facts

Hedgehog

Concept

DISCIPLINED ACTION

Culture of

Discipline

Technology

Accelerators

BUILDUP...

BREAKTHROUGH!

FLYWHEEL

Level 5 Leadership


Level 5 Leadership

”You can accomplish anything in life,

provided that you do not mind

who gets the credit.”

Harry S. Truman


LEVEL 5 EXECUTIVE

Level 5

EFFECTIVE LEADER

Level 4

COMPETENT MANAGER

Level 3

CONTRIBUTING TEAM MEMBER

Level 2

HIGHLY CAPABLE INDIVIDUAL

Level 1

Level 5 Hierarchy


Level 5 Hierarchy

Level 5 Executive –

Builds enduring greatness through a paradoxical blend of personal humility and professional will.


Level 5 Hierarchy

Effective Leader –

Catalyzes commitment to and vigorous pursuit of a clear and compelling vision, stimulating higher performance standards.


Level 5 Hierarchy

Competent Manager –

Organizes people and resources toward the effective and efficient pursuit of predetermined objectives.


Level 5 Hierarchy

Contributing Team Member –

Contributes individual capabilities to the achievement of group objectives and works effectively with others in a group setting.


Level 5 Hierarchy

Highly Capable Individual –

Makes productive contributions through talent, knowledge, skills, and good working habits.


Level 5 Leadership

Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company. It´s not that Level 5 leaders have no ego or self-interest. Indeed, they are incredibly amtitious – but their ambition is first and foremost for the institution, not themselves.


Level 5 Leadership

HUMILITY + WILL


Level 5 Leadership

Personal Humility:

* Demonstrates a compelling modesty, shunning public adulation; newer boastful.

* Acts with quiet, calm determination; relies principally on inspired standards, not inspiring charisma, to motivate.


Level 5 Leadership

Personal Humility:

* Channels ambition into the company, not the self; sets up successors for even greater success in the next generation.

* Looks out the window, not in the mirror, to apportion credit for the success of the company – to other people, external factors, and good luck.


Level 5 Leadership

Professional Will:

* Creates superb results, a clear catalyst in the transition from good to great.

* Demonstrates an unwavering resolve to do whatever must be done to produce the best longterm results, no matter how difficult.


Level 5 Leadership

Professional Will:

* Sets the standard of building and enduring great company; will settle for nothing less.

* Looks in the mirror, not out the window, to apportion responsibility for poor results, newer blaming other people, external factors, or bad luck.


Level 5 Leadership

The great irony is that the animus and personal ambition that often drive people to positions of power stand at odds with the humility required for Level 5 leadership. When you combine that irony with the fact that boards of directors frequently operate under the false belief that they need to hire a larger-than-life, egocentric leader to make an organization great, you can quickly see why Level 5 leaders rarely appear at the top of our institutions.


Level 5 Leadership

KEY POINTS:

* Every good-to-great company had Level 5 leadership during the pivotal transition years.

* Level 5 leaders embody a paradoxical mix of personal humility and professional will.

* Level 5 leaders are ambitious – for the company!


Level 5 Leadership

KEY POINTS:

* Level 5 leaders set up their successors for even greater success in the next generation, whereas egocentric Level 4 leaders often set up their successors for failure.


Level 5 Leadership

KEY POINTS:

* Level 5 leaders display a compelling modesty, are self-effacing and understated. In contrast, two thirds of the comparison companies had leaders with gargantuan personal egos that contributed to the demise or continued mediocrity of the company.


Level 5 Leadership

KEY POINTS:

* Level 5 leaders are fanatically driven, infected with an incurable need to produce sustainded results. They are resolved to do whatever it takes to make the company great, no matter how big or hard the decisions.


Level 5 Leadership

KEY POINTS:

* Level 5 leaders display a workmanlike diligence – more plow horse than show horse.

* Potential Level 5 leaders exist all around us, if we just know what to look for, and that many people have the potential to evolve into Level 5.


Level 5 Leadership

UNEXPECTED FINDINGS:

* Celebrity leaders correlate negatively with going from good to great.

* Level 5 leaders attribute much of their success to good luck, rather than personal greatness.

* Level 5 leadership is empirical, not ideological, finding.


DISCIPLINED PEOPLE

Level 5

Leadership

First Who

then What

DISCIPLINED THOUGHT

Confront the

Brutal Facts

Hedgehog

Concept

DISCIPLINED ACTION

Culture of

Discipline

Technology

Accelerators

BUILDUP...

BREAKTHROUGH!

FLYWHEEL

First Who then What


First Who then What

Two possibilities:

1. Level 5 + Management Team

2. A ”Genius with a Thousand Helpers”


LEVEL 5 + MANAGEMENT TEAM

A ”GENIUS WITH 1000 HELPERS

LEVEL 5 LEADER

LEVEL 4 LEADER

FIRST WHO

Get the right people on the bus.

Build a superior executive team.

FIRST WHAT

Set a vision for where to drive

the bus. Develop a road map

for driving the bus.

THEN WHO

Enlist a crew of highly capable

”helpers” to make the

happen.

THEN WHAT

Once you have the right people

in place, figure out the best path

to greatness.

First Who then What


First Who then What

KEY POINTS:

* The good-to-great leaders were rigorous, not ruthless, in people decisions. They did not rely on layoffs and restructuring as a primary strategy for improving performance.


First Who then What

KEY POINTS:

* Good-to-great management teams consist of people who debate vigorously in search for the best answers, yet who unify behind decisions, regardless of parochial interests.


First Who then What

Rigorousness in people decisions:

  • When in doubt, don´t hire – keep looking.

  • When you know you have to make a people change, act.

  • Put your best people on your biggest opportunities, not your biggest problems.


First Who then What

UNEXPECTED FINDINGS:

* No systematic pattern linking executive compensation to the shift from good to great.

* People are not your most important assett. The RIGHT people are.

* Whether someone is the ”right” person has more to do with character traits and innate capabilities than with specific knowledge, background, or skills.


DISCIPLINED PEOPLE

Level 5

Leadership

First Who

then What

DISCIPLINED THOUGHT

Confront the

Brutal Facts

Hedgehog

Concept

DISCIPLINED ACTION

Culture of

Discipline

Technology

Accelerators

BUILDUP...

BREAKTHROUGH!

FLYWHEEL

Confront the Brutal Facts


CONFRONT THE BRUTAL FACTS(Yet Never Lose Faith)

  • Facts are better than dreams.

  • A climate where the truth is heard.

  • Unwavering faith amid the brutal facts.

  • The Stockdale paradox


* All good-to-great companies began the journey to greatness by confronting the brutal facts of their current reality.

* When you start with an honest and diligent effort to determine the truth of your situation, the right decisions often become self-evident.

Facts are better than dreams


* A primary task in taking a company from good to great is to create a culture wherein people have a tremendous opportunity to be heard and, ultimately, for the truth to be heard.

Four basic practises:

Lead with questions, not answers.

Engage in dialogue and debate, not coercion.

Conduct autopsies, without blame.

Build red flag mechanisms.

A climate where the truth is heard


Unwavering faith amid the brutal facts

The good-to-great companies faced just as much adversity as the comparison companies, but responded to that adversity differently. They hit the realities of their situation head-on. As a result, they emerged from adversity even stronger.


The Stockdale paradox

Retain absolute faith that you can and will prevail in the end, regardless of the difficulties, AND at the same time confront the most brutal facts of your current reality, whatever they might be.


CONFRONT THE BRUTAL FACTS(Yet Never Lose Faith

UNEXPECTED FINDINGS:

* Charisma can be as much a liability as an asset

* Leadership does not begin just with a vision

* Spending time and trying to motivate people is a waste of effort


DISCIPLINED PEOPLE

Level 5

Leadership

First Who

then What

DISCIPLINED THOUGHT

Confront the

Brutal Facts

Hedgehog

Concept

DISCIPLINED ACTION

Culture of

Discipline

Technology

Accelerators

BUILDUP...

BREAKTHROUGH!

FLYWHEEL

Hedgehog Concept


WHAT YOU ARE DEEPLY

PASSIONATE ABOUT

WHAT YOU CAN

BE THE BEST IN

THE WORLD AT

WHAT DRIVES

YOUR

ECONOMIC ENGINE

Hedgehog Concept


Hedgehog Concept

* Understanding what you can (and cannot) be the best at

* Insight into your economic engine – what is your denominator?

* Understanding your passion

* The triumph of understanding over bravado


ASK QUESTIONS,

GUIDED BY THE

THREE CIRCLES

AUTOPSIES AND

ANALYSIS,

GUIDED BY THE

THREE CIRCLES

THE

COUNCIL

DIALOGUE AND

DEBATE,

GUIDED BY THE

THREE CIRCLES

EXECUTIVE DECISIONS,

GUIDED BY THE

THREE CIRCLES

Getting the Hedgehog ConceptAn Iterative Process


Hedgehog Concept

KEY POINTS:

* If you cannot be the best in the world in your core business, then your core business cannot form the basis of your Hedgehog Concept.

* The ”best in the world” understanding is a much more severe standard than a core competence.


Hedgehog Concept

KEY POINTS:

* Search for the one denominator that has the single greatest impact.

* Good-to-great companies set their goals and strategies based on understanding; comparison companies set their goals and strategies based on bravado.


Hedgehog Concept

UNEXPECTED FINDINGS:

* The good-to-great companies are more like hedgehogs – simple, dowdy creatures that know ”one big thing” and stick to it. The comparison companies are more like foxes – crafty, cunning creatures that know many things yet lack consistency.


Hedgehog Concept

UNEXPECTED FINDINGS:

* It took four years on average for the good-to-great companies to get a Hedgehog Concept.

* Strategy per se did not separate the good-to-great companies from the comparison companies.


Hedgehog Concept

UNEXPECTED FINDINGS:

* You absolutely do not need to be in a great industry to produce sustained great results. No matter how bad the industry, every good-to-great company figured out how to produce truly superior economic returns.


DISCIPLINED PEOPLE

Level 5

Leadership

First Who

then What

DISCIPLINED THOUGHT

Confront the

Brutal Facts

Hedgehog

Concept

DISCIPLINED ACTION

Culture of

Discipline

Technology

Accelerators

BUILDUP...

BREAKTHROUGH!

FLYWHEEL

Culture of Discipline


DISCIPLINED PEOPLE

Level 5

Leadership

First Who

then What

DISCIPLINED THOUGHT

Confront the

Brutal Facts

Hedgehog

Concept

DISCIPLINED ACTION

Culture of

Discipline

Technology

Accelerators

BUILDUP...

BREAKTHROUGH!

FLYWHEEL

Technology Accelerators


STEPS FORWARD,

CONSISTENT WITH

HEDGEHOG CONCEPT

ACCUMULATION OF

VISIBLE RESULTS

FLYWHEEL BUILDS

MOMENTUM

PEOPLE LINE UP,

ENERGIZED BY

RESULTS

The Flywheel Effect


DISSAPPOINTING

RESULTS

NO BUILDUP;

NO ACCUMULATED

MOMENTUM

REACTION, WITHOUT

UNDERSTANDING

NEW DIRECTION,

PROGRAM, LEADER,

EVENT, FAD,

OR ACQUISITION

The Doom Loop


The Flywheel and the Doom Loop

”There was no one magical event, no one turning point. It was a combination of things. More of an evolution, though the end results were dramatic.”

Fannie Mae


The Flywheel and the Doom Loop

”We didn´t really make a big conscious decision or launch a big program to initiate a major change or transition. Individually and collectively we were coming to conclusions about what we could do to dramatically inprove our performance.”

Gillette


The Flywheel and the Doom Loop

”I don´t think it was done as bluntly as it sounds. These things don´t happen overnight. They grow. The ideas grow and mushroom and come into being.”

Kimberly-Clark


The Flywheel and the Doom Loop

”We did not make a decision that this was what we stood for at any specific moment. It evolved through many agonizing arguments and fights. I am not sure that we knew exactly what we were fighting for until we looked back and said that we were fighting to establish who we were going to be.”

Nucor


Signs That You are on

the Flywheel

- Follow a pattern of buildup leading to breakthrough.

Signs That You are in the Doom Loop

- Skip buildup and jump right to breakthrough.

The Flywheel and the Doom Loop


Signs That You are on

the Flywheel

- Reach breakthrough by an accumulation of steps, one after the other, turn by turn of the flywheel; feels like an organic evolutionary process.

Signs That You are in the Doom Loop

- Implement big programs, radical change efforts, dramatic revolutions; chronic restructuring – always looking for a miracle moment or new saviour.

The Flywheel and the Doom Loop


Signs That You are on

the Flywheel

- Confront the brutal facts to see clearly what steps must be taken to build momentum.

Signs That You are in the Doom Loop

- Embrace fads and engage in management hoopla, rather than confront the brutal facts.

The Flywheel and the Doom Loop


Signs That You are on

the Flywheel

- Attain consistency with a clear Hedgehog Concept, resolutely staying within the three circles.

Signs That You are in the Doom Loop

- Demonstrate chronic inconsistency – lurching back and forth and straying far outside of the three circles.

The Flywheel and the Doom Loop


Signs That You are on

the Flywheel

- Follow the pattern of disciplined people (”first who”), disciplined thought, disciplined action.

Signs That You are in the Doom Loop

- Jump right to action, without disciplined thought and without first getting the right people on the bus.

The Flywheel and the Doom Loop


Signs That You are on

the Flywheel

- Harness appropriate technologies to your Hedgehog Concept, to accelerate momentum.

Signs That You are in the Doom Loop

- Run about like Chicken Little in reaction to technology change, fearful of being left behind.

The Flywheel and the Doom Loop


Signs That You are on

the Flywheel

- Make major acquisitions after breakthrough (if at all) to accelerate momentum.

Signs That You are in the Doom Loop

- Make major acquisitions before breakthrough, in a doomed attempt to create momentum.

The Flywheel and the Doom Loop


Signs That You are on

the Flywheel

- Spend little energy trying to motivate or align people; the momentum of the flywheel is infectious.

Signs That You are in the Doom Loop

- Spend a lot of energy trying to align and motivate people, rallying them around new visions.

The Flywheel and the Doom Loop


Signs That You are on

the Flywheel

- Let results do most of the talking.

Signs That You are in the Doom Loop

- Sell the future, to compensate for lack of results.

The Flywheel and the Doom Loop


Signs That You are on

the Flywheel

- Maintain consistency over time; each generation builds on the work of previous generations; the flywheel continues to build momentum

Signs That You are in the Doom Loop

- Demonstrate inconsistency over time; each new leader brings a radical new path; the flywheel grinds to a halt, and the doom loop begins anew.

The Flywheel and the Doom Loop


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